How Is Your Orange County City Faring Financially?

Fiscal rankings are a helpful tool in keeping your elected officials transparent and accountable.

Newport Beach Civic Center in Newport Beach, Calif., on Aug. 25, 2021. John Fredricks/The Epoch Times

Commentary

It’s time to reveal the annual ranking of Orange County’s 34 cities in Southern California for the year ending June 30, 2025. More than two-thirds of the cities, 24, were able to have their auditors complete their field work before the end of 2025.

The city of Placentia wins the award for being the last city to approve and post its annual comprehensive financial report (ACFR), completing its audit fieldwork on June 12. The cities of Irvine and Yorba Linda found their city councils approving their ACFRs in early June of 2026.

One of the top-ranked and on-time cities, Cypress, where golfer Tiger Woods was born, included the following in their ACFR:

“Our industry-leading financial management practices are a justifiable source of community pride. Cypress is the only city to be recognized twice by former State Senator (and Certified Public Accountant) John Moorlach for having the strongest unrestricted net (fiscal) position of Orange County’s 34 cities.”

Since cities are watching, how are they ranked? The ACFR provides the unrestricted net position (UNP) for governmental activities in the basic financial statements. Divide this number by the city’s population and one comes up with a per capita. In the chart below, the cities are ranked in order of their per capitas and compared to their positions in the prior year.

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While 28 of the county’s 34 cities stayed pretty much in place, six cities have stories to tell, as two rose six positions and four dropped three or more places. But the big story is that one city increased its capital assets, land and construction in progress, by nearly a half-billion dollars.

There was not much movement in the top ten cities. But one full-service city, having its own police and fire departments, continues to rise in the rankings. Newport Beach had revenues in excess of expendituresof $55.4 million. It appropriated $17.4 million into its net investment in capital assets and $7.6 million was transferred into restricted assets. The combination increased its unrestricted net position by $30.4 million.

Newport Beach is an example of how other cities should manage their finances (see “Government Agencies Should Develop a Financial Plan—Here’s How”).

Yes, it has a beautiful coastal location. And yes, it is a tourist destination. But it’s also a full-service city with fiscal priorities consistently followed by subsequent city councils that have been moving it up the ranks. It’s now in 11th place, moving up six places.

Not bad for a city that was in 32nd place in 2017.

The other city to move up six places was Garden Grove, where Steve Fossett grew up. It had revenues in excess of expenditures of $13.6 million and transferred $58.2 million out of restricted assets. It allocated $4.2 million to its net investment in capital assets and had a prior period restatement of $6.5 million resulting from Governmental Accounting Standards Board (GASB) pronouncement number 101. “This adjustment recognized vacation and sick leave (and applicable payroll taxes) that has not been used but is more likely than not to be used or settled in the future.” The result of these four factors was a reduction to its unrestricted net deficit of $61.1 million.

Los Alamitos, where retired U.S. Army Colonel Raymond Watts once served, had expenditures in excess of revenues of $874,558 and a restatement for correction of an error of $308,530.

An investment made in the previous year was erroneously classified as an expense. The city appropriated $6,444,635 to its net investment in capital assets and transferred $394,202 into restricted assets. The net result was an increase to its unrestricted net deficit of $7,404,865, causing it to drop three places.

San Juan Capistrano, where the mission was founded on November 1, 1776, thus including Orange County in the nation’s 250th anniversary activities, had revenues in excess of expenditures $6.2 million, a restatement of $1.2 million, which was explained in Note 16 of the financial statements, and a transfer out of restricted assets of $2.6 million. It appropriated $24.8 million towards its net investment in capital assets. Combined, the unrestricted net position was reduced by $14.8 million and dropped the city six places.

Brea, which was in 34th place many years ago, returned to this position in the rankings. It had expenditures in excess of revenues of $19.2 million and a negative restatement of $3.7 million, also as a result ofGASB 101. It allocated $4.5 million to net investment in capital assets and transferred $8.8 million into unrestricted assets. Combined, the unrestricted net deficit increased by $36.2 million and dropped Brea six places. Since Costa Mesa had another negative year, it stayed in 33rd place and allowed Santa Ana to move up two places, into 32nd.

The big story is Irvine. It made a massive capital asset acquisition, with land and construction alone of $455 million. That’s one-half billion dollars. With all of the other capital asset activities, its net investment in capital assets increased by $391 million. Its expenditures exceeded revenues by $21 million. And it transferred $229 million into restricted assets. Combined, it reduced the unrestricted net position by a whopping $641 million. This dramatic drop represented 91 percent of the net combined drop of all the Orange County cities combined.

Communicating with Dahle Bulason, Irvine’s director of administrative services, was a pleasant experience. The City Council recently approved the city’s ACFR, so I asked about the delay in doing so.

“The ACFR opinion was issued on February 26; however, our typical practice is to present all four audit reports together as a receive-and-file package. As a result, we generally wait until the ACFR, Single Audit, Great Park audit, and South Coast Air Quality Management District (AQMD) audit are all complete before scheduling the item for Finance Commission and City Council consideration,” Bulason said.

I would recommend posting the ACFR as soon as possible, as inquiring minds want to know what is going on. Especially when acquisitions of nearly one-half billion dollars are being made and there is concern about a $6 million budget deficit.

If you reside in Orange County and need information about your city’s ACFR, staff should be available to assist with your inquiries. It’s difficult to tell all of the stories in detail. For example, the massive amount of dollars being moved around in the city of Irvine should provide its residents with plenty of questions to ask, as getting deeper into the weeds would make this analysis very lengthy.

One word to the wise: If your city is near the bottom of the rankings, do not be surprised if your city council engages in discussions that tax increase measures be placed on your November general election ballot. That’s why the rankings are a helpful tool in keeping your elected officials transparent and accountable.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.